An effort to have materials delivered by suppliers just as the materials are needed, thereby eliminating the need for the buyer to store inventories of component parts. Obviously, the buyer is relying on the...
An effort to have materials delivered by suppliers just as the materials are needed, thereby eliminating the need for the buyer to store inventories of component parts. Obviously, the buyer is relying on the...
This loss is not an extraordinary item, since it is not unusual in nature. However, it can appear as a separate line item in the main portion of the income statement. It will be reported at its gross amount (not net of...
The estimated scrap value at the end of the useful life of an asset used in the business. It is also referred to as residual value.
See hurdle rate.
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...
Also referred to as factory burden, factory overhead, indirect manufacturing costs, and manufacturing support costs. To learn more, see Explanation of Manufacturing Overhead.
The combined federal and state income tax rate that applies to an additional amount of taxable income.
Financial statements based upon various assumptions.
See Explanation of Inventory and Cost of Goods Sold.
See inventory: work-in-process (WIP).
For a merchandiser this is the cost of merchandise purchased after deducting purchase returns, purchase allowances, and purchase discounts but after adding freight-in.
See direct materials usage variance.
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
Federal government securities with a fixed interest rate and maturing in 10 years or less.
A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.
An employee fringe benefit provided by an employer that allows employees to be absent from work with pay. Often the number of paid vacation days allowed is based on the number of years of employment.
The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
A directive to a company’s bank to not honor (pay) a specific check that the company had written. The company making the request will be charged a fee by the bank for this service.
The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...
The second major section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Bookkeeping Video Training Part 12 Bank reconciliation: process to determine the true or adjusted amount of cash, journal entries needed for adjustments to book balance Must-Watch Video Learn How to Advance Your...
An accounting guideline that requires information pertinent to an investing or lending decision to be included in the notes to financial statements or in other financial reports.
The statement of the Financial Accounting Standards Board entitled Financial Statements of Not-for-Profit Organizations. This statement was originally issued in June 1993 and can be read at no cost at www.FASB.org.
The first section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
U.S. social security system.
The one-year period ending at an organization’s typical low point of activity. For example, a school’s natural business year is July 1 through June 30. It is practical to have the accounting and financial...
A journal entry with more than the minimum of one debit and one credit. Example: a debit to Cash of $500 and a credit to Sales of $475 and a credit to Sales Tax Payable of $25.
See CPA Exam.
A business organization different from a sole proprietorship, partnership, and corporation. As the name implies it provides the limited liability protection usually associated with a corporation. To learn more about this...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
See sum of the years’ digits method of depreciation.
See job order cost sheet.
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
See direct materials price variance.
The journal entry recorded in the general journal (as opposed to the sales journal, cash journal, etc.).
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
See bond issue costs.
See direct labor rate variance.
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